FCA goes to court to clear up Covid-19 insurance disputes

Most business insurance is unlikely to pay out for coronavirus hits, the FCA said.

The Financial Conduct Authority (FCA) will ask a court to rule on a series of disagreements between businesses and insurers who are refusing to pay out over coronavirus hits.

The regulator said that it hopes a court ruling on some relevant cases can provide more clarity, both to the insurance sector and to customers.

It will pick a handful of representative cases with the most commonly-worded policies that are causing uncertainty.

Though most business interruption insurance policies are unlikely to pay out during a pandemic, there are “widespread concerns” about the lack of clarity on some policies, the FCA said.

“We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency,” said interim FCA chief executive Christopher Woolard.

Mr Woolard said that policies which clearly should pay out need to do so quickly.

He added that the court action is intended to resolve key issues as fast as possible in cases “where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover”.

The Association of British Insurers (ABI) welcomed the FCA’s plans, adding that the sector would work closely with the regulator.

ABI director general Huw Evans said: “Although the vast majority of business interruption policies do not cover pandemics and the Government has confirmed it will not seek to retrospectively amend contracts, we support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered.”

He added: “For valid claims, leading ABI members have agreed a set of claims handling principles to ensure speedy processing, including interim payments.”

Insurers will have until the middle of the month to clarify their positions to the FCA before it takes action.

Separately the regulator said it expects companies to ensure that customers are still getting value when buying insurance. The insurers should, for instance, consider whether to give payment holidays to restaurants that are closed and not using their liability cover.

It also called on insurers to help individuals who might be struggling to pay their premiums because of the effects of coronavirus.

“The current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value,” Mr Woolard said.